MOVES to limit the tax relief on pensions investing are set to deliver less money for the Government than it had been expecting.
From the start of next year people who save into a pension will only be able to get one valued at €60,000, under changes to the tax relief system.
The new limit on the amount of tax relief people can get for putting money into pensions was expected to deliver savings of €250m to the Exchequer. But it has now emerged it will deliver €130m less than expected.
Finance Minister Michael Noonan confirmed to Fianna Fail's Michael McGrath that the savings to the State would be €120m. Department of Finance officials are claiming the pensions industry had provided the department with data that showed the yield from putting the new limit in place would be higher.
But when officials analysed the proposals they found the tax revenue would be lower.
Mr Noonan told the Dublin Economic Workshop in Limerick last Friday: "I fulfilled my side of the bargain and the industry who gave very detailed figures did not fulfil its side of the bargain, so when they come back to me and deliver I will take away the (pensions) levy."
The minister has been accused of breaking his word after he announced in last week's Budget that the levy on private pensions would be retained instead of being scrapped, as promised.
The levy will rise to 0.75pc of the value of pension assets next year, and fall to 0.15pc in 2015.
It had been promised there would be no pensions levy in 2015. Mr McGrath said the failure to get full savings from changes to the tax reliefs meant the levy was retained. However, the Minister could have achieved the savings by targetting relief going on "high-value pensions".
"Minister Noonan is now extending the levy on all people paying into pensions. That will put the largest burden on those with modest pensions," he said.
It is understood the levy is also going to fund a bailout for defined-benefit schemes that collapse after the sponsoring company has also failed. It comes after the State lost a case in the European Court of Justice taken by Waterford Crystal workers.
Gerry Moriarty, chief executive of the Irish Association of Pension Funds, said the measures implemented by the Department of Finance were introduced in a different manner to pensions industry proposals.
He said this had the effect of diluting the impact of the measures.